Contact us
CALL US NOW 1-888-GOLD-160

Trade Deficit Grows for Second Straight Month as Dollar Weakens

  by    0   0

A shrinking trade deficit was the primary reason GDP jumped in the third quarter. But that trade deficit relief is already reversing.

The October trade deficit swelled to $78.2 billion, a 5.4% increase. It was the second straight month of trade deficit growth.

As Peter Schiff pointed out in a recent interview, the trade deficit narrowed in recent months due to two factors that are both in the process of reversing.

One – the strong dollar, which is now reversing. The dollar just had its worse month in 12 years. … So, that’s going to push the trade deficit up. In fact, the trade deficit in November swelled by 10%. It was a huge jump. But the other factor that helped bring down the trade deficit was all the oil that Biden released from the Strategic Petroleum Reserve. Oil companies were able to buy that oil and then export it, and so, that artificially boosted our exports, which improved GDP. But pretty soon, we’re going to run out of the oil in this strategic reserve. There won’t be a reserve left, so we won’t be able to rely on that crutch.”

Exports fell and imports rose in October.

Exports dropped 0.7% to $256.6 billion. Goods shipments fell 2.1% to $176.0 billion, the lowest level since March.

Meanwhile, the costs of imports grew, rising by 0.6% to $334.8 billion. Imports of goods rose by 0.9% to $275.6 billion.

Much of this was a function of dollar weakness. Earlier this year, the dollar was up by 11%, but the greenback had its worst month in more than a decade in November, and it has continued to fall through the first week of December. As the dollar tanks, the price of US exports increases, making American goods less competitive on the global market. Conversely, the cost of foreign goods for American consumers increases as the dollar weakens.

The dollar strengthened primarily due to the Federal Reserve tightening monetary policy to fight inflation. But the central bank appears to be in the process of making a soft pivot and slowing its interest rate hikes. This will likely mean a continuing decline of the dollar and increasing trade deficits.

A Citigroup economist quoted by Reuters said, “A rewidening in the trade balance will mechanically weigh on GDP growth fourth quarter.”

Many analysts think CPI has peaked, but Schiff thinks we’ll see another surge of rising prices in 2023. The weakening dollar will not only cause the trade deficit to widen, but it will also cause prices to continue to rise. As the dollar loses value, it will increase the cost of imported goods. And Americans buy a lot of imported goods.

One thing that has kept the lid on consumer prices in 2022 has been the strength of the dollar. But I think the dollar has lost that strength.”

Free Silver Report

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Gold Mine Production Up Modestly in 2022 But Remains Below Pre-Pandemic Peak

Gold mine production was up modestly in 2022 as mining operations normalized post-pandemic. But mine output still hasn’t returned to the peak we saw in 2018, boosting speculation that we have possibly reached “peak gold.”


Why Have So Many People Dropped Out of the Labor Market?

Why is there a labor shortage in the US? In a nutshell, a lot of people have simply dropped out of the labor market. They’re not working. But why?


Gold Demand Hit 11-Year High in 2022

Gold demand grew by 18% to 4,741 tons in 2022, the highest demand in 11 years, according to data compiled by the World Gold Council. Massive central bank purchases coupled with strong retail investor buying and slowing outflows from ETFs drove overall demand higher.


Petrodollar on Shaky Ground; Saudi Arabia Willing to Discuss Selling Oil in Other Currencies

In a recent interview, Saudi Arabia Finance Minister Mohammed Al-Jadaan said the country is open to discussing trade in currencies other than the US dollar. This could mark the beginning of the end of petrodollar exclusivity. That would be a huge blow to dollar dominance.


Why Are Central Banks Buying Gold?

As we’ve reported central banks globally have been piling in gold. The question is why?


Comments are closed.

Call Now